About this fund

This Fund is a feeder Fund ( the “Feeder Fund”) and as such invests at least 85% of its assets in class Z2H shares of Robeco Capital Growth Funds SICAV – Robeco Financial Institutions Bonds (“the Master”). The Master is a sub-fund of Robeco Capital Growth Funds SICAV, a Luxembourg open-ended investment company with variable capital. The Master invests mainly in subordinated euro-denominated bonds issued by financial institutions and similar nongovernment fixed income securities. The Master aims to outperform the benchmark by taking positions that deviate from the benchmark. The benchmark of the Master is Barclays Euro-Aggregate: Corp.Fin.Subordinated 2% Issuer Cap. The Feeder Fund uses derivatives to hedge the duration of the Master. The duration hedge will lead to intended performance differences between the Feeder Fund and the Master. Interest rate movements will have a different effect on the Master and the Feeder Fund.

The value of the investments may fluctuate. Past performance is no guarantee of future results.Annualized (for periods longer than one year).Cumulized (total amount of return).Performances are gross of fees and based on closing values. In reality, costs (such as management fees and other costs) are charged. These have a negative effect on the returns shown.Performances are net of fees and based on transaction prices.

Fund

Reference index

The value of the investments may fluctuate. Past performance is no guarantee of future results.Annualized (for periods longer than one year).Cumulized (total amount of return).Performances are gross of fees and based on closing values. In reality, costs (such as management fees and other costs) are charged. These have a negative effect on the returns shown.Performances are net of fees and based on transaction prices.

Performance explanation

Based on transaction prices, the fund's return was 1.80%. The portfolio posted a positive return in April, which was a bit higher than the return of the index. The average credit spread of the index tightened from 232 basis points to 204 basis points during the month. This means that the excess return of subordinated financial bonds over government debt amounted to 1.75% in April. Underlying government bond yields rose during the month, contributing negatively to the portfolio’s return. The beta of the portfolio was a bit above one during the month. This top-down positioning made a positive contribution to the performance of the portfolio. We further reduced the beta overweight during the month. The contribution of issuer selection in April was marginal. Our small holdings in USD and GBP debt contributed negatively to the relative performance of the fund, as non-euro financial debt lagged a bit in April. During the month, we increased our exposure to dollar bonds. Looking at individual issuers, our overweights in Commerzbank, Sabadell and Santander contributed positively. Spreads for Commerzbank tightened significantly after merger talks with Deutsche Bank failed.

Market development

Subordinated debt of financials performed strongly in April, fully driven by the tightening of credit spreads. The positive sentiment was in line with positive sentiment on equity markets. There were a few catalysts for this continued appetite for risk. Chinese economic data was a bit better than expected, it seems that the stimulus by the Chinese government is starting to work. We did not see much impact yet of these green shoots on German economic data. There also was some optimism around the ongoing trade talks between the US and China. At the same time, US rhetoric towards Europe is turning a bit more aggressive. The Brexit theme has moved to the background, as the deadline for the actual exit was postponed twice. The risk of a hard Brexit in the near term is now materially lower and UK financials continued to perform well. New issue activity in the market was very limited, especially taking into account that investor appetite for risk was large. We participated in the new Tier 2 bond issued by Ageas, the Belgian insurance company.

Fund Classification

Currency policy

All currency risks are hedged.

Derivative policy

The Feeder Fund uses derivatives to hedge the duration of the Master. The duration hedge will lead to intended performance differences between the Feeder Fund and the Master. Interest rate movements will have a different effect on the Master and the Feeder Fund.

Dividend policy

This share class of the fund does not distribute dividend.

ESG Integration policy

The prime goal of integrating ESG factors in our analysis is to strengthen our ability to assess the downside risk of our credit investments. Our analysts include RobecoSAM sustainability data and use external sources to make an ESG assessment as a part of the fundamental analysis.

Investment policy

This Fund is a feeder Fund ( the “Feeder Fund”) and as such invests at least 85% of its assets in class Z2H shares of Robeco Capital Growth Funds SICAV – Robeco Financial Institutions Bonds (“the Master”). The Master is a sub-fund of Robeco Capital Growth Funds SICAV, a Luxembourg open-ended investment company with variable capital. The Master invests mainly in subordinated euro-denominated bonds issued by financial institutions and similar non-government fixed income securities. The Master aims to outperform the benchmark by taking positions that deviate from the benchmark. The benchmark of the Master is Barclays Euro-Aggregate: Corp.Fin.Subordinated 2% Issuer Cap.

Expectation of fund manager

We have reduced the credit overweight in the portfolio, but maintain an overweight position as we kept our positive view on the fundamental credit quality of the financial sector. The fact that yield curves are flattening and that the first rate hike in Europe is still not anywhere in sight, is not helpful for financials. But banks and insurance companies have been dealing with the low interest rate environment for a number of years already. It seems unlikely that credit costs for banks will decline further, but we also do not see much reason for a sudden increase in credit charges. We think the recapitalization of the European banking sector is ready, but we do not expect to banks to increase leverage again.We may have been too conservative and we can think of potential positive surprises. China being able to reignite economic growth could have a positive impact on European economies. The change in Fed stance might be just in time to avoid a more significant slowdown in US economic growth. For now we still prefer to be a bit more cautious though. But we still are overweight credit risk and we still see interesting value opportunities, like in the Spanish banking sector.

Jan Willem de Moor

Jan Willem de Moor

Mr. de Moor is a Senior Portfolio Manager and a member of the Credit team. Prior to joining Robeco in 2005, Mr. de Moor was employed by SBA Artsenpensioenfondsen as Senior Portfolio Manager Equities for six years. Before that, he worked at SNS Asset Management holding positions of Portfolio Manager Equities (three years) and Research Analyst (two years). Jan Willem de Moor started his career in the Investment Industry in 1994. He holds a Master's degree in Economics from Tilburg University.

Team

The Robeco Financial Institutions Bonds fund is managed within Robeco’s credit team, which consists of nine portfolio managers and twenty-three credit analysts (of which four financials analysts). The portfolio managers are responsible for the construction and management of the credit portfolios, whereas the analysts cover the team’s fundamental research. Our analysts have long term experience in their respective sectors which they cover globally. Each analyst covers both investment grade and high yield, providing them an information advantage and benefiting from inefficiencies that traditionally exist between the two segmented markets. Furthermore, the credit team is supported by dedicated quantitative researchers and fixed income traders. On average, the members of the credit team have an experience in the asset management industry of seventeen years, of which eight years with Robeco.

Cost of this fund

Ongoing charges

Transaction costs

The expected transaction costs are

Performance fee

This fund may also deduct a performance fee of

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Fiscal product treatment

The fund is established in Luxembourg and is subject to the Luxembourg tax laws and regulations. The fund is not liable to pay any corporation, income, dividend or capital gains tax in Luxembourg. The fund is subject to an annual subscription tax ('tax d'abonnement') in Luxembourg, which amounts to 0.01% of the net asset value of the fund. This tax is included in the net asset value of the fund. The fund can in principle use the Luxembourg treaty network to partially recover any withholding tax on its income.

Fiscal treatment of investor

Investors who are not subject to (exempt from) Dutch corporate-income tax (e.g. pension funds) are not taxed on the achieved result. Investors who are subject to Dutch corporate-income tax can be taxed for the result achieved on their investment in the fund. Dutch bodies that are subject to corporate-income tax are obligated to declare interest and dividend income, as well as capital gains in their tax return. Investors residing outside the Netherlands are subject to their respective national tax regime applying to foreign investment funds. We advise individual investors to consult their financial or tax adviser about the tax consequences of an investment in this fund in their specific circumstances before deciding to invest in the fund.

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